State liquor stores report record sales

Defenders of current system say data show that no change is necessary. Privatization would do better, proponents say.

August 05, 2013|By Scott Kraus and Steve Esack, Of The Morning Call

Pennsylvanians went heavy on the vino last year, helping produce record "profits" for the Pennsylvania Liquor Control Board, giving defenders of the state liquor store system financial ammunition for an expected fall skirmish over privatization.

Factoring in all the agency's expenses, the Liquor Control Board closed the 2012-13 fiscal year with $128.4 million in excess operating revenue on sales of $1.7 billion in new data released Monday. It's a margin that had shrunk as low as $52 million in 2009-10, but has been slowly rebounding with the economy.

The agency attributed the results to retail wine sales, which grew 6 percent, driven by the state liquor stores' Chairman's Selection program that offers special prices on certain wines. Spirits sales were up 3.7 percent, while overall sales were up 1.4 percent.

The boost in sales also produced a boost in tax revenues. Booze buyers chipped in $311 million in liquor tax and $121 million in sales tax to state coffers in the last year, both records. On top of that, the LCB contributed $80 million of its profit to the general fund, as directed by the state budget.

The fresh numbers show Gov. Tom Corbett's efforts to get the state out of the liquor business are wrong, said Bill Patton, spokesman for the House Democratic caucus, which has opposed privatization.

"The governor needs to think about what works in this state and put aside his ideological goggles," Patton said.

Supporters of privatizing the state stores say the state would get just as much — if not more — tax revenue if private companies were selling wine and liquor, because with more outlets and improved convenience, fewer shoppers will head out of state looking for deals.

"You cannot have a government monopoly in place and really create the convenience, selection and better prices that consumers want," said Katrina Anderson, senior policy analyst with the pro-privatization Commonwealth Foundation.

It is the third consecutive year the state stores have seen rising profits, setting a higher bar for any privatization plan that promises not to hurt state revenues. The LCB also chipped in $26.4 million to cover State Police liquor control enforcement costs and an additional $2.6 million toward alcohol abuse prevention.

Steve Miskin, spokesman for the House Republican caucus, whose leader, Rep. Mike Turzai, R-Allegheny, has been privatization's top advocate, dismissed the revenue report. Of course, the LCB makes money, he said. It's a monopoly.

"They are always going to make money because they are the only business in town," Miskin said. "But it's a monopoly that should not exist and it's a business government should not be participating in. The proper role of government is regulation, enforcement and education, and seeing as Pennsylvania's alcohol-related deaths are not better than other states, it shows they are lacking in their responsibility."

In the spring, Corbett attempted to tie getting the state out of the liquor business to the state budget, but failed to get the House and Senate to agree on a plan before June 30. As the budget deadline approached, liquor privatization was linked to a plan to fund transportation, and both failed as a result.

That link will remain an obstacle, said Senate Minority Leader Jay Costa, D-Allegheny.

"I believe the administration and House Republicans will continue to pursue this misguided attempt to sell off a very profitable and solid asset," Costa said. "Unfortunately, this discussion will continue at the expense of funding our roads and bridges and fixing transit because this wine and spirit conversation is directly related to our inability to get a transportation funding bill concluded and that's very disturbing to me."

Privatization supporters in both houses have vowed to revisit the issue in the fall. Miskin said House leaders are in talks with the Senate and Corbett's office to reach a compromise.

The financial results should give privatization proponents pause to reconsider, said Wendell Young IV, president of United Food and Commercial Workers Local 1776, which represents state store clerks. But he said he knows it won't.

Modernizing the existing state store system to make it more consumer-friendly and nimble would be a better place to start, he said.

"These new numbers show there is no valid case for privatization, the only argument here is that we should allow the system to run as efficiently and profitably as possible to benefit Pennsylvanians and to benefit them more with another $100 million to $200 million in revenue," Young said.

The administration has no plan to go that direction, said Chad Saylor, spokesman for Lt. Gov. Jim Cawley, who has been one of the administration's most vocal privatization advocates.

"A more efficient, market-driven system would, in our view, generate even more revenues," he said.